Thomson Reuters is wasting no time integrating the two merged companiesâ staff and legacy products. But despite potential economies of scale and product rationalization, the market data and trading systems vendor may struggle in todayâs financial markets climate.

The balance sheets of financial services corporations are bleeding red ink due to massive writedowns on credit derivatives and mortgage instruments, and companies have laid off tens of thousands of employees this year. This means fewer traders needing access to Bloomberg or Thomson Reuters screens.

Robert Iati, partner and head of global consulting at Tabb Group, said data vendors fare poorly when the financial services industry goes into cost-cutting mode.

More ominously, financial services firms have been cutting data aggregators in favor of direct market feeds to avoid latency or trading delays. Iati said: “This is not good for the status quo, but it does give them every reason to improve their own products.”

Because of its more diverse client base, Thomson Reuters as a merged entity argues it may be better suited to seeing off a downward economic cycle than if each firm was on its own. Thomson’s niche market was the buy side whereas Reuters stood firmly on the sell side. Together they span the breadth of clients from the largest investment banks to the smallest of wealth management firms.

Debra Walton, global head of market development at Thomson Reuters, said: “Clearly anyone in financial markets has an eye on the state of the market and the economy. We feel much more comfortable about our ability to be able to deal successfully with the economy now that the merger has taken place.”

Adam Honoré, senior analyst with consultancy Aite Group, agreed that the merger might help them weather the storm. He said: “The Thomson institutional-type business has hardly hiccuped, but for the traditional Reuters business the number of terminals is definitely declining.”

Thomson also offers a large, non-financial product range including legal, scientific and healthcare technology, which will help soften the blow of any financial markets meltdown. At a corporate level, more than 50% of the firm’s profits come from outside the financial markets. Walton said: “That diversification is obviously helpful in any cyclical market downturn.”

Exactly 90 days after the merger was completed, Thomson Reuters released its product strategy, which was based upon three pillars intended to simplify and rationalize the number of products each firm brought to the mix.

The first pillar is at the desktop level. With more than 300,000 terminals between them globally, Thomson Reuters will focus on taking the best-of-breed system from each firm. Reuters 3000 Xtra has its roots on the trading floor of the sell side, whereas Thomson One was designed mostly for off-trading floor clients, mainly on the buy side.

Both of these will be supported, she said, and will ultimately be underpinned by a common technology platform that is in the works. Walton said: “Both have very sizable user groups.”

There is a question mark over whether ultimately Thomson Reuters will want to continue to develop and support two desktop applications.

Iati said: “If you put them side to side, 3000 Xtra gets better user preference ratings. Even Thomson Reuters would recognize that it is better received than Thomson One.”

The second integration pillar is at content level. Walton said: “There is a massive amount of content from both firms, and a best-of-breed conversion will take place to deliver enhanced value for all of our clients.”

Thomson’s municipal market data and StreetEvents corporate disclosure service has been added to the Reuters 3000 Xtra desktop application, as well as fixed income data from Thomson’s Tradeweb online trading system. Thomson One has added news from Reuters, Reuters instant messaging service, and Lipper funds data.

The third pillar is infrastructure, and Thomson Reuters intends to consolidate the five networks it currently uses down to one. This will be based on a Reuters network, known as the integrated data network or IDN. Thomson’s real-time data feeds will be consolidated onto the Reuters Data Services real-time data feed infrastructure.

Walton said: “For the most part this is a behind-the-scenes effort and should be invisible and non-disruptive for customers.”